A TEACHER'S VERSIOJS 
OF THE PIERSON LAW 



BY 

IDA E. HOUSMAN 



'Pierson Teachers* Retirejimnt Fund Law 
Chapter 80, Laws of 1919" 



1919 



TWENTY-FIVE CENTS PER COPY 



N0J2I 1919 



"PIERSON TEACHERS' RETIREMENT FUND LAW 
CHAPTER 80. LAWS OF NEW JERSEY, 1919" 



A Teacher's Version of the 
Pierson Law 

BY 
IDA E. HOUSMAN, B. S. 

Instructor in Mathematics^ Hoboken High Schtol 



CONTENTS 

PARTI 

A Simplified Version of the Pierson Law ^^^^ 

Pream'ble 2 

Sections of 
School Law 

247 Definitions 2 

248 Establishment of System 2 

249 Membership 3 

250 Service Creditable 4 

251 Benefits ' 5 

252 Actuarial Basis 7 

253 Funds Created 7 

254 Collection of Contributions 9 

255 Administration 10 

256 Other Provisions 13 

PART II 

Practical Illustrations of the Pierson Law 

Page 1 ; B, 2, Preamble 13 

Page 1 ; C, Preamble 13 

Prior-Service Credits . . .* 14 

Benefits 15 



^=^ 






A SIMPLIFIED VERSION OF THE PIERSON LAW 

"Pierson Teachers' Retirement Fund Law 
Chapter 80. Laws of 1919." 

Approved April 10, 1919. 
The Pierson Teachers' Retirement Fund Law is an Act of the Legislature of the 
State of New Jersey which amends an Act approved October 19, 1903. This Amend- 
ment shall be known as Article XXVIII, Sections 247-256, New Jersey School Law. 

PREAMBLE 

The preamble states the following reasons why this new amendment is added to 
the New Jersey School Law. 
Reasons 

A. Two Retirement Systems have been established in New Jersey: 

1. A Teachers' Retirement Fund (T.R.F.) which provides a disability annuity 

after 20 or more years of service to which the teachers are required to 
contribute, 

2. A Thirty-five Year Half-pay Service Pension provided by the State. 

B. After two years of investigation, assisted by pension experts and actuaries, the 

Pension and Retirement Fund Commission found that: 

1. The two Systems conflict with each other in their operation. 

2. The two Systems, in many cases, give double retirement benefits, amount- 

ing on an average to more than the salary received when in active service. 

C. The actuary employed by the State Teachers' Association and the actuary of 

the Pension Commission both report that the liabilities of the T. R. F. 
are far in excess of its present and prospective assets. 
Therefore, the contributions of present teachers are being used for the pay- 
ment of annuities to teachers now retired. 
Note 

Chairman, Pension and Retirement Fund Commission, 

Assemblyman Arthur N. Pierson, 
Actuary, employed by State Teachers' Association, 

David Parks Fackler. 
Actuary, Bureau of State Research of the N. J. State Chamber of Commerce, 
assisted the Pension and Retirement Fund Commission, 
George Buck. 
Supervisor of the Pension Staff, Bureau of State Research of the N, J. State 
Chamber of Commerce, assisted the Pension and Retirement Fund Commission, 
Paul Studensky. 

D. Since a New Jersey Legislature has compelled the teachers of the State to 

contribute to the T. R. F. which is in an unsound financial condition, it 
is the duty of the Legislature to correct this injustice and this em- 
barrassment. 

E. To advance the best interests of our educational system and protect the future 

well being of the teachers, the State recognizes that a disability and old 
age retirement system should be established on a scientific basis, 

ARTICLE XXVIII. 

TEACHERS' PENSION AND ANNUITY FUND 

247. DEFINITIONS 
Each term shall be defined as it is introduced in Sections 248-256. 

248. ESTABLISHMENT OF SYSTEM 
Definition 

"Teacher" shall mean any teacher, teacher-clerk, principal, vice-principal, super- 
visor, director, superintendent, State commissioner or assistant commissioner of 
education and any other member of the teaching or professional staff of any school 
within New Jersey, conducted wholly or partly under the superintendence and expense 
of the State: 
PROVISO 

A "substitute teacher" or a teacher not regularly engaged as a full-time occu- 
pation outside of vacation is not deemed a "teacher." The board of trustees shall set- 
tle all cases in doubt. 

; j COPYRIGHT OFFI£f 



r4 

3^ Definition 

J The "Teachers' Pension and Annuity Fund," which is hereby created and 

i established is a retirement system for public school teachers, and it shall include the 

iseveral funds created and placed under the management of a board of trustees. 

p^^^owers and Privileges 

fl ^ The '"Teachers' Pension and Annuity Fund" shall have the powers and priv- 

^ ileges of a corporation, and under its corporate name shall transact all business, invest 

^ all funds, pay all warrants, and hold all cash,) securities and other property. 

5 249. MEMBERSHIP 

Membership begins not earlier than Septerriber 1, 1919. 
Classes 

A. New-Entrants — Compulsory. 

All persons who become teachers after September 1, 1919, and whose appoint- 
ments are made after the passage of this Act, shall become members by virtue of 
their appointments. 
PROVISO 

Any Normal School graduate who may become a teacher after September 1, 
1919, and who before the passage of this Act made an agreement to teach for a 
definite time in New Jersey as a consideration for Normal School instruction shall not 
be compelled to become a member of the new Fund during the life of such agreement. 
If he desires he may file an application for membership. After the expiration of this 
agreement, he shall become a member by virtue of any subsequent appointment. 
PROVISO 

A teacher who signed a contract prior to the passage of this Act, and whose 
contract extends beyond September 1, 1919, shall not be compelled to join while under 
such contract. If he desires he may file an application. 
B-C-D. Present-Entrants (Present Teachers) — Optional. 

These shall become members by filing with the board of trustees an applica- 
tion for membership prior to September 1, 1920. 
Class B. — Non-members of Teachers' Retirement Fund (T. R. F.) 
Class C. — Members of T. R. F. by virtue of appointment since January 1, 1908. 
Class D.— Members of T. R. F. before January 1, 1908. 
E. Present-Entrants (Optional). 

All teachers, not included under A, B, C or D, who shall file an application for 
membership within a year after their appointment or after the passage of 
this Act. 
Application. Waiver. 

The certificate of enrollment for Class A and the application for membership 
for Classes B, C, D and E shall be in such form as the board of trustees shall designate. 
The application for Classes C, D and E shall contain a waiver of all rights and privileges 
as a member or prospective beneficiary of the T. R. F. The board of trustees shall file 
one copy of the certificate or application in its office, and one copy with the employer 
of the teacher, which shall notify the employer to make the required salary deduction. 
Time for Application Extended 

The time for present teachers, in the discretion of the board of trustees may 
be extended not beyond 1923. 
As to Future Applications 

Any teacher who does not elect to become a member while eligible under 
Classes B, C, D or E and who is not eligible under Class A, may make a future applica- 
tion. Such teacher shall be credited with the same limited allowance for prior service 
as a new-entrant; i.e., a maximum allowance of 10 years. 
Right of Membership May Be Denied 

The board of trustees may, in its discretion, deny membership to: 

1. Teachers only partly paid by the State. 

2. Teachers on a temporary or not per annum basis. 

Membership, in the discretion of the board, may be optional with the teacher 
in either case. 
Membership Shall Be Forfeited 

1. After a continuous absence without pay for more than two years. 

2. After less than 2 years of service in any 5-year period after he last became a 
member. 

3. Upon the withdrawal by a contributor of his accumulated deductions. 

4. Upon retirement on a pension. 

5. Upon death. 



250. SERVICE CREDITABLE 

Statement of Service — Present — Entrant 

In addition to the application for membership, each present-entrant shall file 
a detailed statement under oath of all school-service in and out of New Jersey rendered 
prior to September 1, 1919 for which he claims credit, and such other facts required for 
the proper operation of the retirement system. 
Statement of Service — New — Entrant 

Each new-entrant shall file a detailed statement of all school-service in and out 
of New Jersey prior to membership for which he desires credit and on account of which 
he desires to contribute, and such other facts required for the proper operation of the 
retirement system. 

Year's Service Fixed 

The board of trustees shall fix by rules how much service in any year is the 
equivalent of a year of service. In computing such service, or in computing the "aver- 
age salary," the board shall credit no time during which a member was absent without 
pay for more than 1 month. In any calendar year, all service shall not be equivalent to 
more than 1 year. 
Definition — Prior-Service Certificate 

A prior-service certificate is a statement certifying the aggregate length of 
service prior to membership, and is based on the applicant's statement of service which 
has been verified by the board of trustees. 
Prior-Service Credits — Present-entrant 

A present-entrant shall receive credit for all service prior to September 1, 1919, 
up to the nearest number of years and months, not exceeding 35 years, including not 
more than 10 years of service outside of New Jersey. 
Prior-Service Credits — New-entrant 

A new-entrant shall be credited up to the nearest number of years and months, 
not exceeding 10 years, with all service in and out of New Jersey prior to membership 
for which he desires credit and on account of which he desires to contribute. 
Value of Prior-Service Certificate 

A. Certificate — Final. 

A prior-service certificate shall be final unless modified by the board of 
trustees: 

1. Upon the application of the member within one year after the date of is- 

suance or modification. 

2. Upon the discovery by the board of an error or fraud. 

B. Certificate — Void. 

When membership ceases, a prior-service certificate shall be void. 

C. Certificate — Restored. 

When membership is resumed, a prior-service certificate shall be restored 
"for the same number of years of prior-service as were previously 
credited less a deduction of one year for each year during which the 
teacher was not a member of the retirement system since the issuance 
of the initial prior-service certificate." 

D. Certificate — Renewed (Disability Beneficiary 251, 10). 

When a disability beneficiary is restored to active service, his prior- 
service certificate at retirement shall be renewed; upon his later retire- 
ment he shall be credited with his previous certified service plus his ad- 
ditional service. 
Total Service 

Total service equals service during membership plus service credited on a 
prior-service certificate which is in full force and effect. 

251. BENEFITS 
Superannuation Retirement 
Conditions 

At age 62, upon the request of the member or his employer, if a written state- 
ment is filed by the member or the employer stating when such retirement is desired. 

After January 1, 1926 every member who has or shall attain age 70. 

After 35 or more years of certified service any present-entrant, not covered by 
the tenure of office law, who becomes a member of the Pierson Fund before November 
1, 1919 and loses his position before age 62, shall be retired on one-half of his Average Sal- 
ary. 



Superannuation Retirement Allowance. Present-entrants. 

This Retirement Allowance for present-entrants shall consist of: 

1. The Annuity. 

2. The Membership Pension. 

3. The Prior-service Pension. 

4. The Teachers' Retirement Fund Pension. 

DEFINITIONS 

The Retirement Allowance equals the Annuity provided by the member's con- 
tributions to the new Annuity Fund plus the Pension provided by the State. 

The Average Salary means the average salary of the last 5 years preceding 
retirement. 

Regular interest means interest at 4%, compounded annually. 

The Annuity equals the actuarial equivalent at retirement of the total of the 
amounts deducted from the salary of a member and credited to his individual account 
in the Annuity Savings Fund together with interest at 4% compounded annually. 

The Membership Pension equals 1/140 of his Average Salary multiplied by the 
years of service since he became a member. 

The Prior-service Pension equals 1/70 of his Average Salary multiplied by the 
years of certified prior service. 

The Teachers' Retirement Fund Pension for previous members of the T. R. F. 
equals the actuarial equivalent of his contributions, without interest, to the T. R. F. 
prior to September 1, 1919, which he has not otherwise received. 

Superannuation Retirement Allowance. New-entrants 

This Retirement Allowance shall consist of: 

1. The Annuity. 

2. The New-entrant Pension. 

DEFINITION 

The New-entrant Pension equals 1/140 of his Average Salary multiplied by thfe 
number of years of his total service. 
Minimum Superannuation Allowance 

The minimum retirement allowance at age 62 for 20 or more years of service 
shall be $400 per annum. 

DISABILITY RETIREMENT 
Conditions 

Under age 62, retirement for disability shall be made by the board of trustees 
upon the application of the member's employer, or upon his own application or that of a 
person acting in his behalf. 

PROVISO 

That a report submitted by the physician or physicians designated by the board 
of trustees to examine such applicant shows that the member is physically or mentally 
incapacitated for service and ought to be retired. 

PROVISO 

That the member has rendered 10 years of service in New Jersey, and if he is 
a new-entrant has also been a member for 10 years. 

Right of Appeal 

Appeal may be made to the State Board of Education, if the applicant is dis- 
satisfied with the decision of the board of trustees. The decision of the State Board 
shall be final and binding upon all parties. 

Disability Retirement Allowance 

This Retirement Allowance shall consist of: 

1. The Annuity. 

2. The Disability Pension. 

3. The Teachers' Retirement Fund Pension. 

DEFINITION 

The Disability Pension is a pension such that added to a member's Annuity 
shall equal a retirement allowance of 1/70 of his average salary multiplied by the 
years of his total service. 
Minimiun Disability Allowance 

The minimum disability allowance shall be not less than $300 per annum or 30% 
of his Average Salary. 

5 



Maximum Disability Allowance 

The maximum disability allowance shall not exceed 9/10 of the rate of retire- 
ment to which he might have been entitled at age 62. 
Medical Examination of Disability Beneficiary 

Yearly for the first five years following retirement and once in every three- 
year period thereafter until age 62, the board may require a medical examinatoin by a 
physician or physicians designated by them, or the beneficiary may apply for the ex- 
amination. 
IF FOUND ABLE TO WORK 

If the examination shows that the beneficiary is not totally physically or 
mentally incapacitated, and is engaged or is able to engage in a gainful occupation, 
then the amount of his retirement allowance shall be reduced so that the allowance plus 
the amount earned shall not exceed his Average Salary. 

As his earning capacity changes so may his retirement allowance be altered, 
provided that his retirement allowance shall not exceed his original retirement allow- 
ance, or an amount which added to the amount earned exceeds the amount of his 
Average Salary. 
REFUSAL TO WORK 

Should he refuse to work, or to accept an offered position in the public schools, 
his retirement allowance may be reduced to half of its former rate. 
REFUSAL TO BE EXAMINED 

Should he refuse to submit to a medical examination, his allowance may be 
discontinued until his withdrawal of such refusal, and should his refusal continue for 
one year, he forefeits all rights to a retirement allowance. 
RESTORATION TO SERVICE 

Should a disabiUty beneficiary be restored to active service at a salary equal 
to his former, his retirement allowance shall cease, and he shall again become a mem- 
ber of the retirement system and shall contribute at the same rate as he paid upon 
his disability. 

WITHDRAWAL AND DEATH BENEFITS 
Refund of Accumulated Deductions 

A contributor who withdraws from service or ceases to be a teacher for any 
cause other than death or retirement shall be paid on demand the total of the amounts 
deducted from his salary and credited to his individual account in the Annuity Sav- 
ings Fund, with interest at 3^%, compounded annually. 

Should a contributor die before retirement, the refund shall be paid to his 
estate or such person as he shall have duly designated to the board of trustees. 
Withholding Deductions 

If a member withdraws all or part of his accumulated deductions, later re- 
enters membership without re-depositing his withdrawn amount and then again wishes 
to withdraw, the board of trustees may withhold all or part of his later accumulations 
for not more than one year. 

OPTIONAL BENEFITS 

A contributor may choose at retirement A. or B. 

A. Total retirement allowance payable throughout life. 

B. Reduced payments, i. e., he may elect the actuarial equivalent of the an- 
nuity only or the pension only or his retirement allowance in a lesser annuity or a 
lesser pension or a lesser retirement allowance, payable throughout life with the fol- 
lowing options: 

Option 1 — If he dies before he has received the present value at retirement 
of his annuity, his pension, or his retirement allowance, the balance 
shall be paid to his estate. 

Option 2 — Upon his death, his annuity, his pension or his retirement allow- 
ance shall be continued and paid through the life of such person as he 
shall have duly designated at retirement. 

Option 3 — Upon his death, one-half of his annuity, his pension, or his retire- 
ment allowance shall be continued and paid throughout the life of such 
person as he shall have duly designated at retirement. 

Option 4 — Some other benefit or' benefits shall be paid to the member or such 
person or persons as he shall name provided that such benefit or benefits 
together with the lesser annuity or lesser pension or lesser retirement 
allowance shall be certified by the actuary, to be the equivalent of his 
annuity, his pension or his retirement allowance and shall be approved 
by the board of trustees. 



BENEFITS OF TEACHERS NOW RETIRED 

35- Year Half-Pay State Pension 

All pensions payable by the State prior to September 1, 1919, shall be paid 
from the Pension Fund (253) beginning with September 1, 1919. All pensions below 
$400 shall be increased to $400. 

Teachers' Retirement Fund Annuity 

Should the T. R. F. by reason of insolvency or liquidation cease to pay in full 
the annuities granted prior to September 1, 1919, there shall be paid from the Pension 
Fund such part or all of such annuities. 
PROVISO 

No payment shall be made from the Pension Fund unless the T. R. F. has 
made a corresponding and proportionate reduction in each annuity. 
PROVISO 

The board of trustees shall be the sole judge whether the amount to be paid 
by the Pension Fund corresponds to the amount of a reduction in the annuity by 
the T. R. F. 

252. ACTUARIAL BASIS 

Preparation of Actuarial Tables 

"Immediately after the establishment of the retirement system the actuary 
of the board of trustees shall make such investigation of the mortality service and 
compensation experience of the teachers of the state of New Jersey as he shall re- 
commend, and the board of trustees shall authorize, for the purpose of determining 
the proper tables for the purposes of the system. On the basis of such investigation 
and recommendation the board of trustees shall:" 

1. Adopt the necessary mortality, service and other tables. 

2. Certify the rates of deduction from the salaries of teachers necessary to 
pay their annuities at retirement. 

3. Certify the rates of contribution which shall be paid by the State to the 
Pension Accumulation Fund (253). These rates shall be expressed as a proportion 
of the compensation of members at various ages. 

Valuation of Assets and Liabilities 

The actuary, as soon as practicable, on the basis of such tables as the board 
of trustees shall adopt, shall make a valuation of the assets and liabilities of the Funds 
(253) created. 

Periodical Investigations by the Actuary 

In 1921, 1924 and once in every 5-year period thereafter, said actuary shall 
make an actuarial investigation into the mortality, service and salary experience of 
the members and beneficiaries of the retirement system, and shall make a valuation 
of the assets and liabilities of the various funds, and upon the basis of such investiga- 
tion and valuation the board of trustees shall adopt tables of mortality, service, rates 
of deduction, rates of contribution, etc. 

253. FUNDS CREATED 

Two Classes of funds are created: 

A. Funds derived from Members' Contributions. 

1. The Annuity Savings Fund. 

2. The Annuity Reserve Fund. 

B. Fimds derived from the School Apportionment Fund, i. e., the State. 

1. The Pension Fund. 

2. The Pension Accumulation Fund. 

3. The Pension Reserve Fund. 

4. The Expense Fund. 

A. Funds derived from Members' Contributions. 

1. The Annuity Savings Fund. 
DEFINITION 

The Annuity Savings Fund shall be the fund in which shall be accumulated 
deductions from the salaries of teachers. 

AMOUNT TO BE CONTRIBUTED 

The actuary of the board of trustees, upon the basis of such tables as the 
board shall adopt shall determine for each contributor the "proportion of compensa- 
tion." 



Definition 

The "proportion of compensation" is such that when deducted from each pay- 
ment of his prospective salaries and accumulated at interest at 4%, compounded annu- 
ally shall be sufficient at age 62 to provide an annuity equal to the pension allowed 
for service during membership (Membership Pension) and in the case of a news- 
entrant for such prior-service as he both claimed and was allowed. The "proportion" 
shall be computed to remain constant until age 62. The "proportion" for a con- 
tributor entering at age 61 shall apply to any contributor entering the retirement 
system at a greater age. 

RATES OF DEDUCTION FROM THE TEACHERS' SALARIES 

The board of trustees shall certify to each employer the rate of deduction 
from each teacher's salary computed on the "proportion of compensation." The em- 
ployer shall deduct on each pay-roll after the certificate becomes effective. No deduc- 
tion for annuity purposes shall be made for a member who has attained age 62 and 
completed 35 years of service, if such member elects not to contribute. 

AMOUNT EARN ABLE IN PAYROLL PERIOD 
Definition 

The Amount Earnable by a member in a pay-roll period is the salary payable on the 
first day of such period. 

If the teacher was not a contributor on the first day of the pay-roll period, no de- 
duction shall be made during that period. 

To help in making deductions, the deduction may be modified by an amount which 
shall not exceed .001 of the salary earnable in a pay-roll period. 

DEPOSIT IN SINGLE PAYMENT 

Any new-entrant may deposit in the Annuity Savings Fund by a single payment 
such an amount which will entitle him to the rate of contribution for an earlier entrance age. 

REDEPOSIT 

A. In addition to the deductions required, any contributor may redeposit in a single 
payment an amount equal to the total amount which he withdrew. ^ 

B. Any contributor may deposit by a single payment an amount computed to*be 
sufficient with the retirement allowance to provide a total retirement allowance of one-half 
of his final salary at age 62. 

A & B. Such additional deposits shall become a part of the total of the amounts 
deducted from his salary with interest at 4%, compounded annually. 

INTEREST ON WITHDRAWALS 

A contributor who withdraws shall be paid out of the Annuity Savings Fund the 
total of the amounts deducted from his salary with 3^% interest, compounded annually. 

The difference of ^% interest, compounded annually, to which he would be entitled 
at retirement shall be transferred to the Expense Fund. 

2. Annuity Reserve Fund 
DEFINITION 

The Annuity Reserve Fund shall be the fund from which shall be paid all annuities 
and all benefits in lieu of annuities. 

At retirement, the total of the amounts deducted from a member's salary with 
interest at 4%, compounded annually, shall be transferred from the Annuity Savings Fund 
to the Annuity Reserve Fund. 

B. Funds Derived from School Apportionment Fund, i.e., the State. 
1. Pension Fund 
DEFINITION 

The Pension Fund shall be the fund in which shall be : 
Accumulated the reserves for pensions to present-entrants 
Paid in the moneys for all other pensions except for new-entrants 
Paid out all pensions except those for new-entrants. 

ACTUARY TO DETERMINE LIABILITY 

The actuary, after making the first valuation, shall determine the present value of 
the liability for pensions to present-entrants then retired or to be retired. Then he shall 
compute the total salary paid to all members during the preceding year. Then he shall de- 
termine what per cent of the total salary is 1/25 of said liability. 

ANNUAL PAYMENT BY STATE 

The State Comptroller shall pay annually, beginning with 1920, from the School 
Apportionment Fund into the Pension Fund the amount certified by the board of trustees. 
This amount shall be equal to the per cent determined in the preceding and the followmg 
paragraphs. 

8 



INCREASING PAYMENTS 

Each annual payment shall be at least 3% greater than the preceding. The annual 
payment plus the money in the Pension Fund, shall provide the pensions for the current year, 
and shall equal 1/25 of the said liability. The State Comptroller shall continue annual pay- 
ments until the accumulated reserve in the Pension Fund equals the present value of all 
future pensions to be paid present-entrants, then retired or to be retired. 

Definition 

The School Apportionment Fund means the moneys retained in the State Treasury 
to be apportioned to the several counties by the Comptroller for school purposes. 

ESTIMATE— ZS-Y EAR HALF-PAY PENSION AND TEACHERS' RETIREMENT 

FUND ANNUITY 

The board of trustees shall prepare annually an estimate of the amounts required to 
pay the 35-Year-Half-Pay Pensions granted prior to September, 1919, and the T. R. F. 
Annuities when the T. R. F. is unable to pay. The State Comptroller shall pay the required 
amounts from the School Apportionment Fund into the Pension Fund. 

APPROPRIATION FOR 1919 FOR THE 35-YEAR HALF-PAY PENSION 

All moneys appropriated for the 35-Year Half-Pay Pension for the fiscal year be- 
ginning July, 1919, less the amount disbursed for said pensions during July and August, shall 
on September 1. 1919, be paid by the State Treasurer into the Pension Fund. 

2. Pension Accumulation Fimd 
DEFINITION 

The Pension Accumulation Fund shall be the fund in which shall be accumulated the 
reserves necessary to pay all pensions to be granted to new-entrants. 

PAYMENTS ON ACCOUNT OF NEW-ENTRANTS 

In July, 1920. to cover the preceding ten months, and annually thereafter, to cover 
the preceding year, the State Comptroller shall pay from the School Apportionment Fund 
into the Pension Accumulation Fund on account of all new-entrants who contributed for 
one month or more during each preceding period. The board of trustees shall certify such 
money as shall be necessary to provide during their prospective active service the pension 
reserve needed for a disability or superannuation pension. The amount for each teacher 
shall be included in the aggregate amount. The ratio of the amount for each teacher to the 
salary earnable during this preceding period shall be constant during his entire period of 
prospective active service, and shall be based on mortality and other tables and interest at 
4%, compounded annually. 

3. Pension Reserve Fund 
DEFINITION 

The Pension Reserve Fund shall be the fund from which shall be paid all pensions 
or benefits granted to new-entrants. 

At retirement an amount equal to a new-entrant's Pension Reserve Fund shall be 
transferred to said Fund from the Pension Accumulation Fund. 

CANCELLATION OR REDUCTION OF DISABILITY PENSION 

Should any Disability Pension be cancelled, the pension reserve thereon, shall be 

transferred from the Pension Reserve Fund to the Pension Accumulation Fund. 

Should a Disability Pension be reduced as a result of an increase in the beneficiary's 

earning capacity, the annual reduction shall be paid annually into the Pension Accumulation 

Fund. 

4. Expense Fund 

DEFINITION 

The Expense Fund shall be the fund from which the expense of the administration 
shall be paid. 

PAYMENT BY STATE TO EXPENSE FUND 

The board of trustees, after making allowance for the amounts to be received by 
the Expense Fund from the Annuity Savings Fund, shall certify annually to the State Comp- 
troller the amount required for expenses in the ensuing fiscal year. The State Comptroller 
shall pay the amount from the School Apportionment Fund into the Expense Fund. 

254. COLLECTION OF CONTRIBUTIONS 

A. Collection of Members' Contributions 
Records of Teachers 

Each employer shall keep such records and furnish such information as the board 
of trustees may require. 

9 



A Teacher's Relation to the Retirement System 

Any teacher to whom the "Pierson Law" applies shall be informed by his employer 
of his duties and obligations in connection with the retirement system as a condition of his 
employment. Every teacher accepting employment shall be deemed to consent and agree to 
the required salary deductions and other provisions of the "Pierson Law." 

Payments Less Reductions 

Notwithstanding any other law affecting salary, tenure, etc., and that the minimum 
salary shall be reduced, payment less the required deduction shall be a complete acquittance 
of all claims for service rendered in the given period. 

Deductions from Salary Certified 

The custodian of school moneys and, in other cases, his employer shall notify the 
board of trustees within 10 days after the appointment of such appointment. 

The board of trustees shall certify to the custodian or employer the rate of deduc- 
tion for annuity purposes. 

The custodian or employer shall certify to the State Treasurer on each payroll a 
statement as voucher for the amounts deducted, and shall transmit or credit the amount to 
said Treasurer. He shall send a duplicate statement to the board of trustees. 

Failure by Custodian of School Moneys a Default 

Failure on the part of the custodian of school moneys in any school district to 
comply with these provisions shall constitute a default and the State Board of Education may 
withhold school moneys until such default is made good. 

Annuity Savings Fund Credited 

The State Treasurer shall credit the Annuity Savings Fund with each amount 
transmitted or credited. He shall transmit to the board of trustees monthly, or at less 
frequent intervals as the board shall designate, a detailed statement of all amounts paid in 
and credited by him to the Annuity Savings Fund. 

Member's Individual Account Credited 

The board of trustees shall credit the individual account in the Annuity Savings Fund 
of each member with the amount deducted from his salary. 
B. Collection of Employer's Contributions 

Estimates of Amounts for Each Fimd 

Upon the basis of each actuarial appraisal, the board of trustees shall annually pre- 
pare and certify to the State Comptroller an estimate of the amounts necessary to be paid 
from the School Apportionment Fund to the various funds for the ensuing fiscal year. 

Deductions Before Apportionment 

The State Comptroller, prior to apportioning on or before February first, the School 
Apportionment Fund among the counties of the State, shall deduct from said Fund in addi- 
tion to any other sums to be legally deducted, the amount certified to him by the board of 
trustees as necessary to pay the various funds of the retirement system for the ensuing 
school year. He shall pay such amounts into the various funds on the first day of July 
following the certification. 

If No Deductions or Amount Insufficient 

If at any time no deductions shall have been made, or if the amount deducted shall 
not be sufficient to make the payments provided, "such payments shall be provided for by the 
Comptroller of the Treasury in making the then next deductions as required herein, 
and shall be in addition to the sum certified to him by the board of trustees as necessary 
for the payments for the then ensuing school year." 

Appropriation for System 

The sum of $25,000 is appropriated from the School Apportionment Fund to meet 
the expense of establishing and administering the retirement system. 

Meeting Pensions Previously Granted 

The sum of $250,000 is appropriated from the School Apportionment Fund to meet 
the cost of the 35-Year Half-Pay Pensions and the cost of such annuities granted by the 
T, R. F. which are assumed by the "Pierson Fund" and shall be payable on or after' July 
1, 1919. The State Comptroller shall deduct such sum from the School Apportionment 
Fund, and shall pay said sum into the Pension Fund. 

255. ADMINISTRATION 

A. Board of Trustees 
Organization 

The board of trustees shall be organized immediately after the passage of this Act. 

10 



Functions 

The proper operation of the retirement system shall be vested in a board of 
trustees. The board shall establish rules and regulations for the administration and trans- 
action of its business and for the control of the respective funds. It shall perform such 
other functions as the letirement system requires. 
Membership 

The membership of the board of trustees shall consist of : 

1. The Commissioner of Education of the State of New Jersey. 
PROVISO 

The Commissioner may appoint one of the assistant commissioners, i. e., the as- 
sistant commissioner who acts in his place during his absence, to serve in his stead. 

2. The Treasurer of the State of New Jersey. 

3. One trustee appointed by the Governor to serve until September 1, 1921. His 
successor shall be appointed each for a term of 3 years. 

4. Three trustees elected from among the members of the retirement system to 
serve 1, 2 and 3 years respectively from the first day of November following their election. 
One trustee shall be a resident of and employed in Hudson, Essex or Bergen ; one trustee, 
in either Passaic, Sussex, Warren, Morris, Union, Hunterdon, Somerset, Middlesex, Mer- 
cer or Monmouth ; and the third, in either Ocean, Burlington, Camden, Gloucester, Salem, 
Cumberland. Atlantic or Cape May. Their successors shall be elected for a term of 3 years. 

5. One trustee, not a teacher nor an officer of the State, elected by the other 
trustees, to serve until January 1, 1921. The successor shall be elected for a term of 3 
years. 

Vacancy in the Board 

A vacancy shall be filled for the unexpired term in the same manner as for regular 
appointment or election. 

Pending Choice of Teacher Trustees 

The Commissioner of Education, the State Treasurer and the trustee appointed by 
the Governor are empowered to perform the duties of the board of trustees until the elec- 
tion of the 3 teachers from the retirement system. All rules and regulations adopted by 
them shall be subject to change when the membership of such board shall be completely 
filled. 

Annual Convention 

1. Time and Place 

An annual convention of the retirement system shall be held at the State House 
in Trenton, at twelve o'clock, noon, on the second Saturday in October each year, beginning 
with 1919. 

2. Purposes 

The purposes of the convention are : 

Electing members of the board of trustees. 
Receiving the report of the board of trustees. 
Transacting business within its jurisdiction. 

3. Delegates 

The convention shall be composed of delegates from each county in the State. 
It shall be called to order by a member of the board of trustees, designated by said board, 
and shall organize by the election of a chairman and a secretary. Each county shall be 
entitled to be represe'nted by 1 delegate for each 200 members of the retirement system in 
said county, and 1 delegate for any fraction over 100. 

PROVISO 

Each county shall be entitled to at least 1 delegate. 

4. Election of Delegates 

Delegates shall be elected by a majority vote of the county members at a meeting 
held for this purpose. The county superintendent shall select a convenient place of meeting. 
He shall issue a notice of the time and place at least 10 days before the date of such meet- 
ing. The meeting shall organize by the election of a chairman and secretary. The secretary 
shall, within 5 days after said meeting, forward to the board of trustees a certificate con- 
taining the names and addresses of the delegates elected to the annual convention, and shall 
furnish said delegates with a certificate of their election. In case of a vacancy, the remaining 
delegates from the county may fill such vacancy by appointing a properly qualified member 
in said county. 

5. Quorum 

A majority of all the delegates shall constitute a quorum for the transaction of 
business. 

11 



B. Administrative Staff and Procedure 
Oath of Trustees 

Each trustee shall, upon his appointment or election, take an oath of office, that 
he will dilligently and honestly administer the affairs of the board, and that he will not 
knowingly violate or willingly permit to be violated any of the provisions of law, applicable 
to the retirement system. Such oath shall be filed in the office of the Secretary of State. 

Voting by Trustees 

Each trustee shall be entitled to one vote in the board. Four votes shall be nec- 
essary for a decision. The board of trustees shall keep a record of all its proceedings, 
which record shall be open to public inspection. 

Chairman, Actuary, Legal Advisor and Employees 

The chairman shall be elected by the board from its membership. 

The actuary shall be engaged by the board to be their technical advisor in matters 
regarding the operation of the several funds, and shall perform such other duties as are 
connected with the funds. 

The legal advisor of the board shall be the Attorney-General of the State of New 
Jersey. 

Employees shall be appointed by the board, as may be necessary to transact the 
business of the retirement system. 
Data as to Funds 

The board of trustees shall keep in convenient form such data, recommended by 
the actuary, as shall be necessary for actuarial valuation of the various funds. 

Annual Report 

The board of trustees shall publish annually a report showing a valuation of the 
assets and liabilities of the funds, certifying as to the accumulated cash and securities of 
the funds and giving an account of the operation of the system. The board shall submit 
the report to the Governor. Copies shall be furnished to the office of the State Department 
of Education, the State Treasurer, and to each employer for the use of the members and 
the public. 

No Compensation; Expenses Met 

The board of trustees shall serve without compensation, but shall be reimbursed 
from the Expense Fund for any necessary expenditures. No teacher shall suffer loss of 
salary or wages through serving on the board of trustees. Compensation for all other 
personal service to the retirement system shall be fixed by the board. 

Office of the Board 

The board of trustees shall establish itself in an office in such city as it shall con- 
sider most suitable for the transaction of its business. 

C. Management of Funds 
Investment of Various Funds 

The board of trustees shall be the trustees of the several funds. 

The board shall have full power to invest the funds, subject to all the restrictions, 
etc., imposed by law upon investment of sinking funds. Subject to like restrictions, etc., 
they shall have full power to hold, purchase, sell, assign, transfer or dispose of any of the 
securities and investments, as well as of the proceeds of said investments and any moneys 
belonging to said funds. 
Interest 

The board of trustees shall allow Regular Interest on the mean amount for 
the preceding year in each of the funds with the exception of the Expense Fund. This 
Regular Interest shall be paid from the interest and other earnings on the moneys of the 
retirement system ; any additional amount required shall be included in the amount certified 
to the State Comptroller for the payments to the various funds from the School Apportion- 
ment Fund for the ensuing school year. 

Conditions of Various Funds 

The custodian shall be the State Treasurer. He shall make all payments from 
said funds only upon voucher signed by the chairman and countersigned by such other 
person as may be designated by the board of trustees. 

Ready Money on Deposit 

To meet pensions, annuities and other payments, an available fund, not exceeding 
10% of the total amount in the several funds, shall be kept on deposit in any bank in this 
State organized under the laws of New Jersey or the United States, or in any trust company 
incorporated by any law of this State. 

12 



PROVISO 

The sum deposited in any one bank or trust company shall not exceed 25% of its 
paid-up capital and surplus. 

Trustees Not to Have Interest in Investments [except as herein provided] : No trustee 
and no employee of the board shall have, direct or indirect: 

1. Any interest in the profits of any investment made by the board. 

2. Any pay or emolument for his services. 

3. Any use of investments, for himself or as an agent, except to make such cur- 
rent and necessary payments as are authorized by the board. 

4. Any power to become an endorser or surety or an obliger for moneys loaned 
by or borrowed of the board. 

256. OTHER PROVISIONS 
State Supervision of Funds 

The State Department of Insurance shall supervise the various funds of the re- 
tirement system. 
Exemption from Taxation 

The following are exempt from any State or municipal tax, and shall not be subject 
to execution garnishment, attachment or other process, and shall be unassignable except 
as provided in this Act : 

1. The right of a teacher to a pension, an annuity, a retirement allowance, or a 
return of contributions. 

2. Any benefit or right accrued or accruing to any person under the "Pierson Law." 

3. The moneys in the various funds. 
Protection Against Fraud 

Any person, knowingly making any false statement, or falsifying or permitting to 
be falsified any record or records in any attempt to defraud the retirement system, shall 
be guilty of a misdemeanor and shall be punishable under the laws of the State. Changes 
or errors, resulting in the employee or beneficiary receiving more or less than he would 
have been entitled to, shall on discovery be corrected by the board of trustees. The board 
shall, as far as practicable, adjust the payments so that the correct actuarial equivalent of 
the benefit shall be paid. 
Repealer 

All acts and parts of acts, any portion of the act to which this act is an amendment, 
which are inconsistent with the provisions of this act are hereby repealed. 
Validity of Act 

"If any section, clause or part of this act shall be declared unconstitutional by the 
decision of any court of competent jurisdiction, such decision shall not invalidate or destroy 
the force or purpose of the remainder thereof." 

This act shall take effect immediately. Approved April 10, 1919.- 



13 



PART II 

PRACTICAL ILLUSTRATIONS OF THE PIERSON LAW 

ILLUSTRATION OF PAGE 1— B, 2 

The following statement is based on the Report of the Bureau of State Research, 
Consecutive No. 12, No. 1. October 1918. 

Teachers on New Jersey Retired List, June 30, 1918 

Number 

Receiving Double Benefits 363 

Receiving Teachers' Retirement Fund Annuity only 225 
Receiving 35 Year Half-Pay Service Pension only.. 54 

ILLUSTRATION OF PAGE 1— C . 

1. The financial condition of the Teachers' Retirement Fund is shown in the Re- 
port of the Pension and Retirement Fund Commission, January, 1919, page 3. 

Financial Condition of Teachers' Retirement Fund 

Obligations towards present annuitants and present active teachers $19,061,000 

Assets to be realized from present capital and from prospective contributions of 

present active teachers 4,239,000 





Average Ratio 


Average 


of Benefit 


Benefit 


to Salary 


$1085 


103% 


404 


59% 


634 


50% 



Deficit $14,822,000 

"The deficiency of almost $15,000,000 is the result of the inadequacy of the rates 
of contributions charged by the Fund, especially in the case of the older teachers, who 
joined it during the first ten years of its operation, to pay the benefits promised." 

II. Figures indicating the deficit have been presented in another form by David 
Parks Fackler, the actuary employed by the New Jersey State Teachers' Association. Mr. 
Fackler submitted his report on November 2, 1917. 

The Future of the Teachers' Retirement Fund 
Year Excess, Receipts Over Annuities Year Excess, Receipts Over Annuities 

1917 $484,247.52 1924 $363,070.11 

1918 484,443.85 1925 323,978.70 

1919 478,516.42 1926 279,908.83 

1920 466,632.09 1927 230,954.37 

1921 449.011.08 1928 177,207.81 

1922 425,775.80 1929 118,791.30 

1923 397,065.59 1930 55,709.16 

Year Deficit 

1931 $12,040.84 

III. The financial condition of the 35-Year Service Pension is stated in the Report 
of the Pension and Retirement Fund Commission, January', 1919, page 24. 

Financial Condition — 35-Year Service Pension 
Liabilities 
The present value of pensions : _ Assets 

To present pensioners $2,140,849 Contributions to be made by the 

To be paid present teachers who State $23,129,212 

will receive benefits 20,988,363 

$23,129,212 



Total $23,129,212 

ILLUSTRATIONS— PRIOR-SERVICE CREDITS 



■Years- 



I. Present-entrants Service Allowance 

A. A present-entrant whose total service prior to Septem- 

ber 1, 1919, is 423^ 35 

B. A present-entrant whose service includes 14 years out- 

side of New Jersey is allowed for such service 14 10 

C. A present-entrant who applies for membership after 

September 1, 1920, had ?il 10 

II. New-entrant 

A new-entrant whose total service in and out of New Jersey is 24 10 

14 



Years 

Service Allowance 

III. Present-entrtint or New-entrant 

A present-entrant or new-entrant who withdraws from the 
"Pierson Fund" and later re-enters teaching and the 
"Fund" has credit as follows: 
Credit on his prior-service certificate at withdrawal is.. 25 .. 

Credit allowed on his "restored prior-service" certificate 

when he re-enters 5 years later . . . 20 

IV. Disability Beneficiary 

A disability beneficiary who is able to return to service has 
credit as follows: 

Credit allowed on his prior-service certificate at retire- 
ment is 30 

Credit allowed when he returns to service and teaches 

10 years before final retirement is 10 

Total allowance at final retirement is 40 

THE COST OF THE ALLOWANCE FOR SERVICE OUTSIDE OF NEW 

JERSEY 
Present-Entrants 

The State shall pay the entire cost for credit for service outside of New Jersey, 
not exceeding ten years. 

New-Entrants 

For new-entrants desiring such credit, each new-entrant shall pay half the cost and 
the State the other half. If the refund, which a teacher receives when he or she resigns in 
Alassachusetts, Connecticut, Pennsylvania, or New York City, is deposited in the "Pierson 
Fund," it will practically cover his or her share of the cost. If he or she does not receive a 
refund, or if he or she had not been a member of a retirement system, he or she will be 
charged a somewhat higher rate of contribution. 

ILLUSTRATIONS— BENEFITS 

Principles Underl5dng the "Teachers' Pension and Annuity Fund,'" 

i.e., "The Pierson Fund" 

1. Reserve Basis 

The system shall be established on a reserve basis, i. e., the yearly contribution of 
each member with interest shall be sufficient on an average to pay the benefit promised at 
retirement. 

2. Joint Contributions 

The system shall be supported by the joint contributions of the m.embers and the 
State, and jointly administered by them. 

3. Refund 

In case of resignation, dismissal or death, a member's contribution with compound 
interest shall be refunded. 

4. Individual Account 

Each m.ember's contributions shall be credited in an individual account in the 
Annuity Savings Fund 

AGE OF RETIREMENT 

The following statements are quoted from "The Social Philosophy of Pensions."* 

"The age at which retirement from service is permitted plays an important part in 
determining the amount both of the pension and of the annual contribution. It is impossible 
to determine dogmatically the age at which retirement should be allowed ; it will undoubtedly 
differ for the two sexes,t and will vary according to occupation and perhaps according to 
locality." 

"Retirement on the ground of service alone, however, usually means retirement at an 
early age"; — "Such early retirement is economically and socially unjustifiable." 

"The postponement of the age of retirement as long as is compatible with occu- 
pational efficiency implies a reduction in the burden of annual contributions, and if voluntarily 
carried beyond the minimum age of retirement means a pension which rapidly increases in 
size as the result of additional accumulations." 

1. Report of Pension and Retirement Fund Commission, January 1919, page 5. 

2. Principles Governing the Retirement of Public Employees, by Lewis Meriam, Chapter 
XIV. 

* Pensions for Public School Teachers, Bulletin No. 12, 1918, Carnegie Foundation 
for the Advancement of Teaching, pages 11, 12. 

t Principles Governing the Retirement of Public Employees, by Lewis Meriam, 
page 167. 

15 



RATES OF CONTRIBUTION REQUIRED OF TEACHERS 

I. Rates of Contribution Effective September 1, 1919. 

The "Pierson Law" states in Section 252 that immediately after the establishment of 
the Retirement System the actuary shall make an investigation of the mortality, service and 
compensation experience of the New Jersey teachers so that "proper tables" may be con- 
structed. With each periodical investigation thereafter, these tables will change, as the 
actuarial data is revised and accumulated. 

The rates which will be used by the board of trustees prior to its investigation of 
the mortality and service experience will undoubtedly be the rates published by the Pierson 
and Retirement Fund Commission in its Report, January, 1919, page 6, so far as present 
teachers are concerned. After the system is operating the rates may be adjusted from time 
to time to care for changes in the mortality and service experience of teachers. Fortu- 
nately for the teachers, an analysis of the rates seems to show that it will not be neces- 
sary to raise the rates unless teachers' salaries are increased or unless teachers live 
longer than teachers have lived in the past. 



RATES OF CONTRIBUTION REQUIRED OF TEACHERS 
Effective September 1, 1919 



Age 


Percentage 


of Salary 


Age 


Percentage 


of Salary 


At Entrance 






At Entrance 






into "Pierson Fund" 


Men 


Women 


into "Pierson Fund" 


Men 


Women 


20 


. . . 3.60 


3.91 


41 


... 4.33 


5.22 


21 


... 3.60 


3.93 


42 


. . . 4.40 


5.32 


22 


. . . 3.60 


3.95 


43 


. . . 4.47 


5.42 


23 


... 3.61 


3.98 


44 


. . . 4.54 


5.53 


24 


. . . 3.62 


4.01 


45 


. . . 4.61 


5.63 


25 


. . . 3.62 


4.05 


46 


... 4.68 


5.73 


26 


... 3.64 


4.09 


47 


. . . 4.76 


5.83 


27 


... 3.66 


4.13 


48 


. . . 4.84 


5.93 


28 


. . . 3.69 


4.18 


49 


. . . 4.92 


6.04 


29 


. . . 3.72 


4.25 


50....^ 


. . . 5.01 


6.16 


30 


. . . 3.76 


4.32 


51 


... 5.10 


6.27 


31 


. . . 3.78 • 


4.39 


52 


... 5.19 


6.38 


32 


... 3.84 


4.46 


53 


... 5.28 


6.49 


33 


. . . 3.89 


4.53 


54 


. . . 5.37 


6.60 


34 


. . . 3.93 


4.60 


55 


. . . 5.46 


6.71 


35 


... 3.97 


4.68 


56 


. . . 5.56 


6.83 


36 


. . . 4.01 


4.75 


57 


. . . 5.67 


6.94 


37 


. . . 4.07 


4.84 


58 


... 5.78 


7.05 


38 


... 4.13 


4.94 


59 


. . . 5.89 


7.17 


39 


. . . 4.19 


5.04 


60 


... 6.00 


7.29 


40 


... 4.26 


5.13 









II. Difference in Rates of Contribution Required of Men and Women. 

The rates of contribution for women teachers are higher than those for men teachers, 
because : 

A. The Mortality Rates are Lower for Women than for Men, i. e., for any- 
given number of persons at a given age, a smaller percentage of women die per year 
than men. 

1. As shown in the Report of the Pension and Retirement Fund Commission, 
January, 1919, page 17, Table 3. 

MORTALITY RATES FOR SERVICE PENSIONERS.* 



Age Men Women 

50 0335 .0134 

55 0377 .0169 

58 0412 .0199 



Age Men Women 

60 0441 .0225 

62 0477 .0255 

70 0702 .0450 



16 



RATES OF WITHDRAWAL 

2. As shown in the difference in "Life Expectation." 

LIFE EXPECTATION— REPORT OF THE PENSION AND RETIREMENT FUND 
COMMISSION, JANUARY, 1919, PAGE 8 

Years 
Retirement Age Men Women 

62 11.84 15.27 

LIFE EXPECTATION— SERVICE PENSIONERS, NEW YORK CITY TEACHERS' 

RETIREMENT FUND * 



Retirement Age 

50 

55 

58 



Years 
Men W^omen 

16.58 23.01 

14.76 19.78 

13.55 17.84 



Retirement Age 

60 

62 

70 



Years 

Men Women 

12.70 16.55 

iiM 15.27 

8.45 10.43 



B. The Rates of Withdrawal from Active Service by Voluntary Resignation 
are Higher for Women then for Men.f 

Age Men Women Age Men Women 

18 0208 .0026 35 0135 .0262 

20 0248 .0123 40 0074 .0111 

23 0265 .0563 45 0032 .0034 

26 0250 .0770 50 0011 .0016 

30 .0203 .0615 54 0000 .0013 

In the earlier years of service, marriage causes more voluntary resignations among 
women than men. Men, instead of resigning, are tied more firmly to their work.? In the 
later years, men have greater opportunities in other fields of service, so that there is only a 
small difference in the later rates of withdrawal. 

In case of a withdrawal, the "Pierson Law" refunds the member's contributions with 
interest at 3^2%, compounded annually. The additional ^% which would be paid to 
purchase an annuity at retirement is transferred to the Expense Fund. Therefore the 
woman's higher withdrawal rate is evidently not an important factor in establishing the 
woman's higher rate of contribution. 

C. The Rates of Service Retirement are Higher for Women than for Men.f 
Age Men Women Age Men Women 

48 0255 .0693 60 0747 .1308 

50 0321 .0747 62 0864 .1570 

55 0511 .0943 65 1085 .2290 

58 0647 .1129 70 9640 .9633 

"RATES OF CONTRIBUTION TO BE PAID BY THE STATE— TO ME-ET HALF 

OF THE COST OF THE RETIREMENT ALLOWANCES TO NEW 

ENTRANTS AND FOR FUTURE SERVICES OF 

PRESENT TEACHERS" $ 



Age 



Percentage of Salary 



Age 



Percentage of Salary 



At Entrance 






At Entrance 






into "Pierson Fund" 


Men 


Women 


into "Pierson Fund" 


Men 


Wom€ 


20 


.. 1.97 


2.15 


33 


, . 2.39 


3.52 


21 


.. 1.99 


2.23 


34 


, . 2.44 


3.60 


22 


. . 2.01 


2.32 


35 


,. 2.49 


3.67 


23 


.. 2.03 


2.41 


36 


, . 2.52 


3.71 


24 


. . 2.05 


2.51 


37 


,. 2.54 


3.73 


25 


.. 2.08 


2.62 


38 


, . 2.56 


3.75 


26 


.. 2.11 


2.75 


39 


. . 2.58 


3.76 


27 


. . 2.14 


2.88 


40 


. . 2.63 


3.77 


28 


.. 2.18 


3.02 


41 


. . 2.70 


3.78 


29 


. . 2.22 


3.15 


42 


. . 2.79 


3.79 


30 


.. 2.26 


3.27 


43 


.. 2.88 


3.81 


31 


. . 2.30 


3.36 


44 


.. 2.98 


3.83 


32 


.. 2.34 


3.44 


45 


. . 3.08 


3.85 



♦Report of the Pension Funds of the City of New York, Part II, 1916, page 112. 
t Report of Pension and Retirement Fund Commission, January, 1919, Tables 1, 2, 
pages 16, 17. 

t Report of Pension and Retirement Fund Commission, Jan., 1919, page 6. 

17 



"The rate is lower than that required of the teachers" because a number of teachers 
leave the service before retirement and "the State does not contribute on their account." 

"In addition to these contributions the State must contribute on account of the total 
cost of allowances for past services and all outstanding pensions." 

"In case of present teachers the State will contribute much more than the teachers. 
Whereas the greater part of the teachers' contributions averaging about 4^% will eventually 
revert to them, together with interest, as the majority will leave the service before retire- 
ment, no part of the State's contributions, amounting to about 7% of salaries, will revert to 

it : besides cost of administration, additional benefits, cost of minimum benefit 

provision, and guarantee in case of a deficiency." 

THE ANNUITY 
Definitions 

'^Pierson Law"* 

The Annuity equals the actuarial equivalent at retirement of the total of the aniounts 
deducted from the salary of a member and credited to his or her individual account in the 
Annuity Savings Fund, together with interest at 4%, compounded annually. 
Wefitzvorth, Smith and Schlauch^ 

A series of equal payments payable at regular intervals of time is called an annuity. 
Zaldari% 

An annuity is the periodical payment of a fixed amount annually, or at more fre- 
quent, regular intervals, either for investment or amortization (extinguishing a debt) pur- 
poses. 

The Annuity Savings § 

The "Pierson Law" provides that the deductions from each teacher's salary shall be 
placed in an individual account in the Annuity Savings Fund and shall be allowed compound 
interest at 4% for the purpose of buying an annuity. This annuity, together with the pension 
provided by the State's contributions, will make the Retirement Allowance. 

If the teacher's salary increases at a more rapid rate than the average during the 
later part of his career, then the savings in the Annuity Savings Fund will not be sufficient 
to provide an annuity which is equal to the pension provided by the State, i. e., a pension 
which equals 1/140 of his Average Salary multiplied by the number of years of service since 
he became a member of the "Pierson Fund." 

By means of the Annuity Savings Table a teacher is able to calculate the amount 
of savings to his or her credit in the Annuity Savings Fund. 

Annuity Savings Table 

The Annuity Savings Table shows how much $1 will amount to if deducted at the 
beginning of every year at 4% interest, compounded annually, for 1 through 50 years. 

ANNUITY SAVINGS TABLE 

At the End Annuity At the End Annuity 

of Year Savings of Year Savings 

4% 4% 

1 1.0400 26 46.0842 

2 2 1216 27 48.9675 

3 3.2464 28 51.9662 

4 4.4163 29 55.0849 

5 5.6329 30 58.3283 

6 6.8982 31 61.7014 

7 8.2142 32 65.2095 

8 9.5827 2>2, 68.8579 

9 11.0061 34 72.6522 

10 12.4863 35 76.5983 

11 14.0258 36 80.7022 

12 15.6268 Z7 84.9703 

13 17.2919 38 89.4091 

14 19.0235 39 94.0255 

15 20.8245 40 98.8265 

*A Teacher's Version of the Pierson Law, Part 1, page 5. 
tWentworth, Smith and Schlauch, Commercial Algebra, Book 11, 1918, page 111. 
jZaldari. Annuities and Amortization. 1917, page 8. 
§ Upton, The Secret of Thrift, Teachers College Record. Nov., 1918, pages 450, 451. 

18 



At the End Annuity 

of Year Savings 

4% 

16 22.6975 

17 24.6454 

18 26.6712 

19 28.7780 

20 30.9692 

21 33.2479 

22 35.6178 

23 38.0826 

24 40.6459 

25 43.3117 



At the End Annuity 

of Year Savings 

4% 

41 103.8195 

42 109.1023 

43 114.4128 

44 120.0293 

45 125.8705 

46 131.9453 

47 138.2632 

48 144.8337 

49 151.6670 

50 158.7737 



Use of the Annuity Savings Table 

Suppose a teacher has a yearly deduction of $50 from her salary for 40 years. What 
will be the total amount to her credit in the Annuity Savings Fund at the end of 40 years? 

Since $1 deducted from her salary yearly amounts to $98.83, at the end of 40 years, 
at 4% interest, compounded annually (see Annuity Savings Table), therefore a yearly 
deduction of $50 amounts to 50 times $98.83, or $4,941.50. 

Practical Illustrations of the Annuity Savings 

The following illustrations show the Total Annuity Savings which a new appointee 
in the Hoboken schools would receive at superannuation retirement. 

Any teacher may calculate his or her probable future total savings in the Annuity 
Savings Fund by means of a similar calculation. 

The necessary steps are : 

1. Select the probable salary scale. 

2. Find the prospective rate of contribution from the Rate of Contribution Table. 

3. Find how much $1 set aside at the beginning of each year will amount to at the 
end of the years of service from the Annuity Savings Table. 

In the following illustrations the first Annual Deduction is the amount that is set 
aside at the beginning of the first year and bears compound interest during the entire period of 
service before retirement. If the salary is increased, then the increase is set aside yearly 
and bears compound interest until retirement. 

For example, in Illustration A. Annual Deduction for the first year is 
$900 X .0391 = $35.19. 

Since $1 deducted at the beginning of each year will amount to $109.01 at the end 
of 42 years, therefore $35.19 deducted in the same way will amount to 35.19 times $109.01, of 
$3,836.06. 

Since the salary increases at the beginning of each year, the Annual Deduction will 
increase by .0391 times $120, or $4.69. This first increase is set aside yearly and bears com- 
pound interest for 41 years. Similarly, the second increase for 40 years, etc. 

A. Total Annuity Savings for a Hoboken Elementary Teacher (Woman) 

New Appointee — Enters "Pierson Fund," September 1, 1919. 

Age at entrance — 20 years. 

Age at superannuation retirement — 62 years. 

Rate of contribution — 3.91%. 

Salary Schedule— $900-$1,500; Yearly increase, $120. 











Increase in 




Total 


Years 




Rate of 


Annual 


Annual 


Annuity 


Annuity 


in Service 


Salary 


Contribution 


Deduction 


Deduction 


Savings 
(S) 


Savings 
(SXD) 


1 


$900 


3.91% 


$35.19 (D) 


(D) 


$109.01 


$3,836.06 


2 


1,020 


3.91% 


39.88 


4.69 


103.82 


486.92 


3 


1,140 


3.91% 


44.57 


4.69 


98.83 


463.51 


4 


1,260 


3.91% 


49.27 


4.69 


94.02 


440.95 


5 


1,380 


3.91% 


53.95 


4.69 


89.41 


419.33 


6 


1,500 


3.91% 


58.65 


4.69 


84.97 


398.50 


7 to 41 


1,500 


3.91% 


58.65 










42 


1,500 


3.91% 


58.65 


Total 




.. $6,045.27 



450, 451. 



* Upton, The Scout of Thrift, Teachers College Record, November, 1918, pages 



19 



B. Total Annuity Savings for a Hoboken High School Teacher (Man) 

New Appointee — Enters "Pierson Fund" September 1, 1919. 

Age at entrance — ^24 years. 

Age at superannuation retirement — 62 years. 

Rate of contribution — 3.62%. 

Salary Schedule— $l,800-$2,500 ; Yearly increase, $120. 



Years 
of Service 

1 
2 
3 
4 

5 
6 
7 

8 to 37 
38 



Salary 

$1,800 
1,920 
2,040 
2,160 
2,280 
2,400 
2,500 
2.500 
2,500 



Rate of 

Contribution 

3.62% 
3.62% 
3.62% 
3.62% 
3.62% 
3.62% 
3.62% 
3.62% 
3.62% 



Increase in 
Annual Annual 

Deduction Deduction 



$65.16 (D) 
69.50 
73.84 
78.18 
82.52 
86.86 
90.50 
90.50 
90.50 



(D) 
4.34 
4.34 
4.34 
4.34 
4.34 
3.62 



Annuity 
Savings 

(S) 
$89.41 
84.97 
80.70 
76.60 
72.65 
68.86 
65.21 



Total 

Annuity 

Savings 

(S XD) 

$5,825.96 
368.77 
350.24 
332.44 
315 30 
298.85 
236.06 



Total %7,727.72 



C. Total Annuity Savings for a Hoboken High School Teacher (Woman) 



New Appointee — Enters "Pierson Fund 

Age at entrance — 24 years. 

Age at superannuation retirement — 62 years 

Rate of contribution — 4.01%. 

Salary Schedule— $1,600-$2,100 



September 1, 1919. 



Years 
of Service 



1 
2 
3 

4 

5 

6 

38 



to 37 



Salary 

$1,600 
1,720 
1,840 
1,960 
2,100 
2,100 
2,100 



Rate of 
Contribution 

4.01% 
4.01% 
4.01% 
4.01% 
4.01% 
4.01% 
4.01% 



Yearly increase, $120, 
Increase 
Annual 
Deduction 



m 
Annual 
Deduction 



$64.16 (D) 
68.97 
73.78 
78.59 
84.21 
84.21 
84.21 



(D) 
$4.81 
4.81 
4.81 
5.61 



Annuity 
Savings 

(S) 
$89.41 
84.97 
80.72 
76.60 
72.65 



Total 

Annuity 

Savings 

(S X D) 

$5,736.55 

408.71 

388.26 

368.45 

407.57 



Total $7,309.54 



The Annuity Value. 



The Annuity Value means the cost of buying a Life Annuity of $1 at a gvien retire- 



ment age. 

Disability Pensioners 

Age Men 

38 12.402 

40 12.186 

43 11.824 

45 11.556 

48 11.114 

50 10.792 

53 10.267 

55 9.890 

58 9.285 



Annuity Value Table* 



Women 
13.746 
13.488 
13.059 
12.744 
12.229 
11.856 
11.254 
10.825 
10.144 



Service Pensioners 
Men 



Age 

62 8.786 

63... 8.549 

64 8.309 

65 8.066 

66 7.820 

67 7.573 

68 7.324 

69 7.074 

70 6.824 



Women 

10.731 

10.419 

10.105 

9.789 

9.472 

9.155 

8.838 

8.521 

8.206 



* Report of the Pensions and Retirement Fund Commission, Jan., 1919, page 22. 

Use of the Annuity Table 

Suppose a woman teacher is credited with $10,731 in her Annuity Savings Account 
What annuity can she buy at service retirement at age 62? 

Since $10.73 will buy a $1 Life Annuity at age 62 (Annuity Value Table), therefore 
$10,731 will purchase as much as $10,731 -^ $10.73 — 1,000, or $1,000 Life Annuity. 

THE REFUND 
The Refund Table 

The Refund Table shows how much $1 will amount to if deducted at the beginning 
of each year at 33^% interest, compounded annually, for use through 50 years. 



20 



Refund Table 



At the End 
of Year 



Refund 
3/2% 

1 1.0350 

2 2.1062 

3 3.2149 

4 4.3624 

5 5.5501 

6 6.7794 

7 8.0516 

8 9.3684 

9 10.7313 

10 12.1419 

11 13.6019 

12 15.1130 

13 16.6769 

14 18.2956 

15 19.9710 

16 21.7050 

17 23.4996 

18 25.3571 

19.. 27.2796 

20 29.2694 

21 31.3289 

22 33.4604 

23 35.6665 

24 37.9498 

25 40.3131 



At the End 
of Year 



Refund 
3^% 

26 42.7590 

27 46.2906 



28. 
29. 
30. 
31. 
32. 
33. 



47.9107 

50.6226 

53.4294 

56.3345 

59.3412 

62.4531 

34 65.6740 



35. 
36. 
37. 
38. 
39. 
40. 



69.0076 

72.4578 

76.0288 

79.7249 

83.5502 

87.5095 

41 91.6073 

42 95.8486 

43 100.2383 

44 104.7816 

45 109.4840 

46 114.3509 

47 119.3882 

48 124.6018 

49 129.9979 

50 135.5828 



USE OF THE REFUND TABLE 

The Refund Table is used to calculate the amount that will be refunded in case of 
withdrawal, dismissal or death. 

Suppose $50 is deducted yearly from a teacher's salary for 10 years. What amount 
would be refunded in case of withdrawal from service? 

Since the "Pierson Law" allows 3%% interest in case of a refund, therefore $1 
deducted yearly amounts to $12.14 at the end of 10 years. Then $50 deducted yearly amounts 
to 50 times $12.14, or $607. 

RETIREMENT ALLOWANCE 

1. Superannuation Retirement Allowance 
A. Present-entrants. 

This allowance consists of: 

1. The Annuity. 

2. The Membership Pension. 

3. The Prior-service Pension. 

4. The Teachers' Retirement Fund Pension. 

ILLUSTRATIVE PROBLEM 

PRESENT TEACHER {MAN) 

Age entered service — 20 years. 

Age enters "Pierson Fund" — 50 years. 

Certified prior-service — 30 years. 

Member of "Pierson Fund" — 12 years 

Average salary — $1,400. 

Previous contributions to Teachers' Retirement Fund — $400. 

Retirement allowance at age of 62 — ? 

SOLUTION 

Superannuation Retirement Allowance for a Present-entrant = 1. Annuity, 

2. Membership Pension. 3. Prior-service Pension. 4. Teachers' Retirement Fund 
Pension. 

1. The Annuity. 

The steps in estimating the annuity are: 

A. Average Salary X Rate of Contribution =: Annual Deduction, $1,400 X 
5.01 = $70.14. 

21 



B. Annual Deduction X Amount of $1 deducted yearly for 12 years (Annuity 

Savings Table) = Total Annuity Savings; $70.14 X 15.63 =$1,096.29. 

C. Total Annuity Savings -f- Cost of $1 of Annuity at Retirement Age (Annu- 

ity Value Table) = the Annuity, $1,096.29 -^ $8.79 =: $124.72. 

1 

2. Membership Pension = of Average Salary X Years of Service since became 

140 

a member 
1 
z= — of $1,400 X 12 

140 
= $120. 

1 

3. Prior-service Pension rr — of Average Salary X Years of Certified Prior-service. 

70 

1 
— — of $1,400 X 30 
70 

= $600. 

4. Teachers' Retirement Fund Pension = Member's Contributions to T. R. F. -f- 

Annuity Value 
— $400 ^ $8.79 
= $45.51 
.*. Retirement Allowance = $124.72 -f- $120 -f $600 4- $45.51 

== $890.23. 

*B. New-entrants. 

This allowance consists of: 

1. The Annuity. 

2. The New-entrant Pension. 

ILLUSTRATIVE PROBLEM 

NEW-ENTRANT (WOMAN) 

Age enters service — 22 years. 

Age enters "Pierson Fund" — 22 years. 

Member of "Pierson Fund" — 40 years. 

Average salary — $1,000. 

Retirement allowance at age 62 — ? 

SOLUTION 

Retirement Allowance for a New-entrant — Annuity -\- Total New-entrant Pension. 
The Annuity = Member's Total Annuity Savings -f- Annuity Value. 

40 

z=: Approximately of $1,000 

140 
= $285.60 (If salary during her career advanced at the average 
rate) 

1 

2. New-entrant Pension r= of Average Salary X Years of Total Service. 

140 

1 

_ $1,000 X 40 

140 

/.Retirement Allowance = $285.60 -f- $285.60. 
= $571.20 Approximately 

II. Disability Retirement Allowance 

This allowance consists of: 

1. The Annuity. 

2. The Disability Pension. 

3. The Teachers' Retirement Fund Pension for Present-entrants. 

22 



ILLUSTRATIVE PROBLEM 

Age enters "Pierson Fund" — 30 years. 

Certified Total Prior Service at Retirement — 34 years. 

"Average Salary"— $1,000. 

Previous Contributions to T. R. F., $100. 

Disability Retirement Allowanance at age of 55 — ? ? ? ? 

SOLUTION 

Disability Retirement Allowance = Annuity 4- Disability Pension, 

1 

r= — of Average Salary X Years of Total 

70 Service. 

1 
= — of $1,000 X34=$4«5.71. 

70 

The Disability Pension is a Pension such that added to a member's Annuity shall equal a Retirement 
Allowance of 1-70 of his average salary multiplied by the years of his total service. 

Since the teacher was a member of the 
Teachers' Retirement Fund an additional Annuity will be bought. 
$100 - $10.83 = $9.23. 

.'. Total Disability Retirement Allowance = $485.71 4- $9.23. 

== $494.94. 



23 



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MISS IDA E. HOUSMAN, 

519 Garden Street, Hoboken, N. J. 



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